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June 2, 2010
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Leading rural telecom carrier Windstream Corporation (WIN) has reportedly completed its acquisition of Iowa Telecom (IWA), a small local exchange operator providing wireline services in rural Iowa, Minnesota, and Missouri. This follows approval of the deal by the state regulators in May 2010. The acquisition was cleared by Iowa’s shareholders in March 2010.
Windstream announced its acquisition of Iowa Telecom for $1.2 billion in November 2009. In February 2010, the companies entered into a tentative settlement of the pending shareholder litigation concerning the merger. Some Iowa shareholders filed class action lawsuits challenging the deal.
As per the agreement, Windstream paid Iowa shareholders $260 million in cash ($7.90 for each share they own). Moreover, Windstream issued 0.84 shares of its stock for each share of Iowa Telecom, roughly $284 million. Additionally, the carrier has repaid around $613 million of Iowa debt.
Windstream is one of the leading rural telecom carriers in the US with approximately 3 million fixed access lines, 1.13 million broadband connections and roughly 369,000 digital TV subscribers. However, the company remains challenged by the steady decline in its fixed-line voice business, given the rapid customer migration to cellular and cable TV services.
Wireless services from Tier-1 carriers such as AT&T (T) and Verizon (VZ) and broadband services by leading cable operators such as Comcast (CMCSA) and Time Warner cable (TWC) are impeding Windstream’s addressable market.
Windstream is buying smaller rural carriers to expand its customer base and boost revenues. Acquisition of Iowa Telecom has strengthened the carrier’s presence in the Upper Midwest and provides the company 249,000 fixed telephony access lines, 96,000 broadband Internet customers and 27,500 TV customers.
Moreover, the deal is expected to be accretive to Windstream’s cash flow and earnings in 2011. The carrier expects to achieve annual cost synergies of $35 million through savings on capital and operating expenses.
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Read the full analyst report on "VZ"
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Read the full analyst report on "TWC"
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